Page 4 - MEOG Week 49

MEOG Commentary MEOG
Drilling award
sees activity
resume in Kuwait
Following bearish comments about upstream targets and the delay of a significant contract award, two rigs have been hired for work onshore Kuwait as the emirate seeks to reinvigorate the upstream.
KuWait
What:
Two ADES International drilling units have been hired by baker Hughes for work onshore Kuwait.
Why:
The move comes
as drilling work is anticipated in the emirate’s offshore in mid-2020.
What next:
Long-held scepticism about Kuwait’s oil production target of 4mn bpd by the end of next year appears to have been proven accurate, though there is no doubting the emirate’s potential.
BAKEr Hughes has hired two rigs from ADES International for drilling work onshore Kuwait, following the delay last month of a contract for work to develop the South ratqa project.
Bearish sentiment around the emirate’s oil and gas sector was compounded in late October by reports that Kuwait was considering aban- doning its long-stated target of increasing crude production capacity to 4mn barrels per day by the end of 2020 and to 4.75mn bpd by the end of 2040.
Also in October, Deputy foreign minister Khaled al-Jarallah told press that negotiations with riyadh were “very positive”, following reports in local media that suggested that a deal had been agreed that would see production resume from the offshore Al-Khafji and onshore Wafra oilfields in the shared Partitioned Neutral Zone (PNZ).
No oil has been produced from the 5,700-square km border area since the fields were shut in because of disagreements between the two governments in 2014 and then in 2015. Output of a combined total of around 500,000 barrels per day remains shut-in, with divisions within the Kuwaiti government said to be among the main factors preventing a restart.
Current total Kuwaiti capacity is around 3.1mn bpd with production running at around 2.7mn bpd.
Bloomberg reported that the 2020 target was being pushed back to 2040 as Kuwait considers the bearish market in which it now finds itself.
reaching 4mn bpd by the end of 2020 was never likely in any case, particularly given that state-owned Kuwait Oil Co. (KOC) is only responsible for 3.65mn bpd, and much of the gap requiring the PNZ to run at capacity for 2020 in its entirety.
Drilling deals
According to a press release from London-listed
ADES, the ADES 180 and ADES 878 units will carry out the onshore deep drilling work under a lump-sum-turnkey (LSTK) contract, beginning in Q2 2020.
The agreement has a fixed primary term of two years and is extendible by a further six months.
Neither company has yet announced the value of the contract nor the dayrates, though ADES said that the latter would be similar to “the existing fleet in Kuwait”.
Baker Hughes’ ADES deal is the second sig- nificant Kuwaiti drilling contract to have been apportioned by a US services giant in the last few months.
In July, Halliburton took two jack-up drilling rigs on charter from Chinese drilling contractor China Oilfield Service Ltd (COSL) for work off- shore Kuwait.
As a sub-contractor, COSL was hired to deploy two jack-up rigs, the Oriental Dragon and the Oriental Phoenix, to drill six high-pres- sure, high-temperature wildcats off Kuwait over a period of three and a half years. These wells will be the first to be drilled offshore Kuwait for around 30 years.
At the time, the arrival of the first rig was said to be anticipated in July 2020, with drilling to begin thereafter. The second rig is due to arrive in January 2021.
COSL said that the drilling would be carried out in around 30 metres of water, with the wells to reach a total depth of up to 5,000 metres.
The deal followed the mid-2019 award by state-owned Kuwait Oil Co. (KOC) to Hallibur- ton of a 181.4mn dinar ($597mn) contract for six exploratory offshore wells.
KOC has been promising to start drilling offshore for many years, with separate surveys completed by Canada’s Sander Geophysics and China’s BGP during the first half of the decade. Announcing the Halliburton deal, KOC CEO
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w w w . N E W S B A S E . c o m Week 49 11•December•2019